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B. Discussion
1. Arguments of the Parties
Respondent argues that petitioners have failed to establish
the amount of advance commissions received by petitioner.
Alternatively, respondent argues that the possibility that
petitioner would ever have to repay any advance commissions was
so remote that it must be disregarded, so that, in effect,
petitioner had no liability for repayment of advance commissions,
and the advance commissions were an item of gross income in the
nature of compensation for services. Petitioner argues that, in
form and substance, the advance commissions were loans and should
be treated as such for Federal income tax purposes.
2. Substantiation
The agreement provides for advance commissions, and the
March 31 and May 1 letters (terminating petitioner’s engagement
by IMA) are ample evidence of IMA’s practice of paying advance
commissions. Petitioner testified that he determined the amount
of advance commissions for 1992 and 1993 (referred to in our
findings of fact as “the 1992 and 1993 reported loan amounts”) by
subtracting from the 1992 and 1993 payments the amounts appearing
on statements received from IMA showing commissions earned for
1992 and 1993 (earned commissions). The parties agree as to the
amounts of the 1992 and 1993 payments. The IMA statements are
not in evidence, and the only evidence we have as to their
existence and content is petitioner’s testimony, as reflected in
his tax returns. Respondent objects to petitioners’ proposed
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